Trade Facilitation Role of Modern Technology

1. Trade FacilitationRole of Modern Technology Hamid Alavi Regional Trade Facilitation Coordinator Middle East and North Africa Region, World Bank Prepared for E-Government BBL October 14, 2004

2. Facilitating market access Quality standards and lowering technical barriers Market access schemes Access to export finance and insurance Lowering transaction costs through Improved transport and trade logistics Enhanced information flows What is Trade Facilitation? 1

3. Reduced transport costs Transparent and harmonized regulations Improved ports facilities and procedures Efficient and transparent customs procedures Simplified trade document processing and clearance processes Lowering Transactions Costs

4. Trade occurs in physical space and moving goods requires time. Trade logistics costs are as important as tariffs Each day saved is equivalent to 0.5% tariff (Hummels) 7% of value of world trade is cost of administration of trade logistics (UNCTAD) Time becomes even more important in multi-stage production (global supply chain) % of vertical specialization in trade (use of imported inputs for exports) has grown 30% in the past 20 yrs and accts for half of overall trade growth. Willingness to pay to save time: Share of airfreight in US grew from 7% in 65 to 30% in 98 Airfreight 7 times as expensive as ocean shipping. Time is a Trade Barrier

5. Imagine if the contents of a ship can be processed in half a day instead of a day … Infrastructure capacity effectively doubled Twice the cargo Twice the # of ships Twice the number of containers Increased harbor duties, excise and revenue Considerably lower cost to traders …even more benefits: These efficiencies offer wider attraction to trading partners Efficiency in vessel turnaround attracts new trading, market center, distribution business. Time is a Trade Barrier

6. A wide-body jet can carry fresh produce from supplier in one hemisphere to the buyer in the other hemisphere on the same or next day. BUT it can take 10 days (in Yemen) to : Process orders Obtain customs and TC approvals Book and schedule transport and distribution Obtain payment approvals Complete the transaction This means removing 10 days from the selling season, revenue that cannot be replaced Time is a Trade Barrier

7. Port efficiency improvements (from 75th to 25th percentile) could reduce transport costs for a country as much as shortening it distance from its trading partners by 9,000 km (IDB 2000) $100 million could be saved each year through the application of ICT (UNCTAD) Singapore gained 1% of GDP Tunisia case Time is a Trade Barrier: What Gains?

8. Many documents Many players A typical trade transaction can take as many as 150 different documents to complete Raw material and component supplier Manufacturer/assembler Customs agents/brokers Customs authorities Government authorities- export promotion/approval/stat. Local transport and warehousing companies Container handlers Port and harbor authorities Shippers (sea, air, road, rail, canal, …) Bank and insurance companies Each have own set of paper forms and interactions with other organizations (incl. counterparts in importing countries)…Take a look ….!! Trade transaction is a complex process

9. IMPORT Pay Taxes Clear Customs Release Goods MANUFACTURING/ VALUE ADD EXPORT /Dues Air, Sea, Land International Transport DOMESTIC SUPPLY CHAIN Customs Storage Port Raw Materials Packaging Transport Storage • Port Processes • Internal Transport • Storage • Container Handling • Loading Ship’s Documents “Informal Processes” IMPORTER • Manifest • Bills of Lading • Sea/AW Bill • Container Plans • Quotations • P.O.s • Delivery Notes • Con. Notes • Invoices • Statements • Invoice • Packing List • Declaration • Delivery Note • Payments • Remittance • Advice Book/Confirm Transport Shipping Documents Pay Taxes Clear Customs Release to Port /Dues Foreign Chambers Commerce • Certificates • Of Origin MANUFACTURER Port Port Customs Customs • P.O. • Contract Terms • Delivery Instructions • L.O.C. Informal Processes • Invoice • Packing List • Declaration • Delivery Note Receive Goods Overseas Embassies • “Legal • Invoices” EXPORTER FOREIGN BUYER Post/ Courier • Certificates • Of Origin • Form A • EUR.1 Chamber of Commerce Finance Ministry Pay Bank Bank • Licenses • Certificates • Government • Approvals • Licenses • Certificates • Government • Approvals Government Departments L.O.C. Packing List Invoice LOC Approval LOC Courier

10. Automated Processing Standard processing of declarations and other governmental applications Enhance risk management Efficient flow of information Automated routing / sharing Role of ICT in Trade Facilitation

11. Mauritius Trade Net has reduced average clearance times of goods from 4 hours to 15 minutes Tunisie Trade Net (TTN) has reduced processing times of trade documents from max of 18 to 7 (3.5 days in cases not requiring technical controls). Time savings in Singapore (STN) translate into 1% of GDP per year. ICT reduces Time and Increases Efficiency - Exapmles

12. Systems built around different agencies Ports Customs Single windows Different ways to use ICT for TF

13. A facility providing standardized information and documents with a single body to fulfill requirements for import, export and transit regulations and clearance. Expedite and simplify information flows between trading community and the government “Single Window”

14. Single Authority (Swedish Single Window) Receives information, disseminates to relevant authorities, coordinates controls to prevent undue hindrance in logistics chain. In Sweden case, the customs performs selected tasks on behalf of other government agencies. Models of “Single Window”

15. Single automated system for the collection and dissemination of information Integrated system: data is processed through the system (Mauritius) Interfaced system: data is sent to the agency for processing (Tunisia) Combination of the above Models of “Single Window”

18. Automated information transactions system (Singapore, Tunisia) Trader can submit electronic declarations to various authorities for processing and approval in one single application. Approval transmitted electronically from authorities to the trader’s computer. Fees, taxes and duties are computed automatically and deducted from the trader’s bank account Models of “Single Window”

20. TUNISIE TRADENET Services • Formation • Assistance Technique • Ingénierie informatique • Intermédiation documentaire électronique • Titre de Commerce Extérieur • Document de Contrôle • Technique (AMC/APE) • Déclaration en Détail des • Marchandise • Paiement électronique des • droits et taxes douaniers • EDIFACT • Messagerie X400 • Web

21. E-Government and Trade FacilitationThe Application of ICT to Trade Document Flows in Tunisia Hamid Alavi Middle East and North Africa Region, World Bank Prepared for January , 2004

22. Before TTN 1

23. After TTN 1

24. Activities Before TradeNet After TradeNet Electronic Transmission Common Electronic document System-assisted Semi-Automated 3 days 15 minutes Physical delivery Separate Documents for different govt. bodies Individuals Manual 8 days 2 days Present documents Codification Verification Import clearance time Declaration processing

25. Steps • Simplification / elimination of procedures • Standardization of information that responds to needs • of different operators • – Single Administrative Document • Facilitating exchange of information • - Common and intelligent network

26. Phased Approach Complexity Quick wins to secure confidence International Standards (UN EDIFACT, etc.) International information exchange requires standards Pilot users Surveys / evaluation / fine –tune Implementing body Implementation Approach

27. Sector specific software Declarants / Freight forwarders (Declaration) Shipping agents (manifest – sea / air) Customs EDI server Software / System Requirements

28. Trade Processes - Chain effect As good as weakest link in the chain Benefits only visible when everything works Complex Many details that must fit together Resistance to change Organizational Shift from paper to electronic processes Prepare to manage project risks -Multiple activities / issues to address Inter-institutional dependencies Issues

29. There is potential dramatic improvements that can be made in trade clearing process when administrative and political commitment joins forces with advances in information technology. … But there is much more involved than simply applying information technology to trade documents. Success Factors

30. Commitment at the highest level of government Cooperation among private sector operators and various government stakeholders at all stages of the process adoption of a regulatory framework that allowed for electronic processing and signature simplification of customs requirements extension of electronic processing to all import and export administration and other agencies involved in trade transactions adoption of internationally recognized standards and codes in order to ensure a common language among different users and in different countries aligning the relative costs of processing paper documentation and on-line processing. Success Factors

31. Questions ?

32. Importer/Exporter Trade Professionals Customs Broker Freight Forwarder Shipping Agent Container Terminal Ports and Harbours Storage Transport Shippers Customs Revenue Technical Controls PIAs Cert. of Origin PSI “Legal Invoices” Banks Insurers etc. Players in the Trade Value Chain